Support

A cookie is a piece of data stored by your browser or device that helps websites like this one recognize return visitors. We use cookies to give you the best experience on BNA.com. Some cookies are also necessary for the technical operation of our website. If you continue browsing, you agree to this site’s use of cookies.

Events

Bloomberg Next marketing services allow clients to elevate their brands and extend their reach through our established and trusted expertise, enhanced with engaging event production, appealing design, and compelling messaging.

Shire May Be Next Allergan in Inversion Pursuit

For over 50 years, Bloomberg Tax’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

By Laura Davison

Jan. 11 — Shire Plc,
which agreed to buy Baxalta Inc. for $32 billion, could become an
attractive inversion partner for a U.S. company as the Irish
drugmaker gains size.

Shire agreed to buy Baxalta in a Jan. 11 deal that
will lower the Bannockburn, Ill.-based company's tax rate to 16
percent to 17 percent from a predicted 23 percent, Chief Executive
Officer Flemming Ornskov said in a call to investors. The bid to
take over Baxalta, which makes treatments for the rare bleeding
disease hemophilia, avoids the Treasury Department's inversion
rules because Shire is the larger company.

“This brings them into the world of Allergan. Shire
and Allergan could become the two best acquirers of U.S. pharma
companies around,” Robert Willens, a tax consultant in New York,
told Bloomberg BNA. “If Shire continues to make acquisitions of
U.S. companies, they may get to a size to acquire a company the
size of ‘a Pfizer', like Johnson & Johnson.”

Inversion Appeal

Pfizer Inc. and Ireland-based Allergan Plc agreed in
November to merge in a $160 billion deal, forming the largest
inversion in U.S. history. Large foreign companies are appealing
for inversion deals, because Treasury's inversion consequences kick
in when U.S. shareholders own at least 60 percent of the combined
company (244 DTR G-8, 12/21/15).

As long as the U.S. doesn't pass new laws changing
inversions, Shire is eligible to seek to merge with a larger U.S.
company as soon as 2017, said Sam Fazeli, who directs European
research for Bloomberg Intelligence.

Treasury and Internal Revenue Service officials have
said the government plans to propose in coming months more than 150
pages of regulations addressing inversions. The rules will combine
the provisions outlined in Notice 2014-52 and Notice 2015-79,
issued in recent years to stem the tide of corporations opting to
reduce tax bills by inverting (244 DTR G-8, 12/21/15).

Regulate Your Expectations

The rules won't be able to stop the deals entirely,
and Congress isn't expected to pass anti-inversion legislation
before the presidential election in November.

Shire isn't new to pursuing inversions. The
Dublin-based company tried, and failed, to merge with AbbVie Inc.
in 2014. The AbbVie merger plans, coupled with Medtronic Inc.'s
inversion with Irish medical device make Covidien Ltd., spurred
Treasury to release the first of the so-called “inversion notices”
in September 2014. AbbVie's board withdrew from the deal a month
after Notice 2014-52 was released.

The Baxalta acquisition comes with tax risks, in
addition to the benefits. Shire, as the acquirer, will assume any
tax liabilities tied to Baxalta's spinoff from Baxter International
Inc. in July. Mark J. Enyedy, Shire's interim general counsel, told
investors that the tax-free nature of the tax code Section 355
spinoff will be preserved because the transaction has a business
purpose and isn't being used as a device to distribute profits to
investors after Shire acquires the business.

“There is both the strong business purpose as well
as the absence of an intent to allow” shareholders to sell for
cash, Enyedy said. “We are comfortable with the tax position and
importantly our counsel was in a position to deliver towards an
unqualified level opinion.”

The spinoff could be viewed as a device if the IRS
were to determine that Baxter knew about Shire's interest in buying
the unit before the separation.

Cravath, Swaine & Moore LLP and Slaughter and
May are advising Shire on the deal. Baxalta is advised by Jones
Day.

To contact the reporter on this story: Laura Davison
in Washington at ldavison@bna.com

To contact the editor responsible for this story:
Brett Ferguson at bferguson@bna.com

All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to books@bna.com.

Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)

Notify me when updates are available (No standing order will be created).

This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to research@bna.com.

Put me on standing order

Notify me when new releases are available (no standing order will be created)